There appear to be several genuine issues of material fact which must be decided if this case goes to trial. In its pre-trial order, Cicione has set out the contested facts that it intends to prove at trial with some specificity. It is Schmidt's position as to its motion that even if Cicione were able to prove all of the contested facts, Schmidt would nevertheless be entitled to summary judgment. For the purpose of this discussion, we shall proceed on the assumption that Cicione will be able to produce evidence supporting all of its allegations. Therefore, in the recitation of facts as hereinafter set forth, whenever the parties are in disagreement the facts have been resolved and all inferences drawn in Cicione's favor. It is on this basis that we summarize the facts in this case as follows:

During the period of time in which Cicione was a Schmidt "ID" distributor, 1959-1973, Cicione alleges that Schmidt continually made certain demands upon Cicione. They included demands that Cicione increase inventory, hire additional personnel, make substantial investments in plant and equipment, and take on bookkeeping systems which were not suited to Cicione's business. In addition to these requirements, Schmidt allegedly fixed both the price that it charged Cicione, as well as the resale price at which Cicione could sell to distributor and tavern accounts. Schmidt constantly threatened to terminate Cicione if its dictates were not followed. In March of 1971 Schmidt allocated territories among the Philadelphia distributors and in July of 1972 cut 15% of Cicione's territory for its alleged failure to comply with Schmidt's dictates.

(a) Count I alleges violations of Section I of the Sherman Act, charging that, with respect to Cicione, Schmidt illegally dictated business practices, maintained territorial restrictions and imposed resale prices;

(b) Count III charges violations of Sections I and II of the Sherman Act, alleging that Schmidt's termination of Cicione's dealership constituted a concerted refusal to deal with plaintiff; that Schmidt and Pflaumer conspired to force Cicione to surrender his distributorship; and that their conduct was an unlawful attempt to monopolize, or a conspiracy to monopolize, the distribution of Schmidt's beer and the distribution of all beer in Philadelphia.

In response to Schmidt's motion for summary judgment, Cicione argues that even though pre-trial discovery has been substantially completed, material issues of fact remain. In a motion for summary judgment, all doubt as to the existence of a genuine issue of material fact must be resolved against the moving party. First Pa. B. & T. Co. v. United States Life Ins. Co., 421 F.2d 959, 962 (3d Cir. 1969), reh. denied December 10, 1969. As stated in Moore's Federal Practice, para. 56.15[3] at 2335-36:

The courts are in entire agreement that the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to judgment as a matter of law.

The courts hold the movant to a strict standard. To satisfy his burden the movant must make a showing that is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact.

In its complaint, Cicione makes sweeping allegations which boil down to the contention that the termination of its distributorship violates both Section I and Section II of the Sherman Act. Cicione appears to predicate its Section I claim on the theory enunciated by the Supreme Court in United States v. Parke, Davis & Co., 362 U.S. 29, 80 S. Ct. 503, 4 L. Ed. 2d 505 (1960), that under certain circumstances, refusal of a manufacturer to deal with a distributor can constitute a "combination" in restraint of trade within the purview of the Sherman Act,
*fn6"
,
*fn7"
see also, United States v. Bausch & Lomb Optical Co., 321 U.S. 707, 722, 64 S. Ct. 805, 88 L. Ed. 1024 (1944); Federal Trade Commission v. Beech-Nut Packing Co., 257 U.S. 441, 42 S. Ct. 150, 66 L. Ed. 307 (1922). However, in its complaint and pre-trial order, the only allegation made to support its contention that the termination violates Section I of the Sherman Act is the claim that Schmidt desired to make Pflaumer its sole distributor. Furthermore, a review of the pleadings, depositions, affidavits, answers to interrogatories and pre-trial order reveals no factual basis which would bring this case within the Parke Davis exception or any other exception to the well-settled law that the termination of a distributorship, without more, is not an antitrust violation.

A refusal to deal becomes illegal under the Act only when it produces an unreasonable restraint of trade, such as price fixing, elimination of competition or the creation of a monopoly. The fact that a refusal to deal with a particular buyer without more, may have an adverse effect upon the buyer's business does not make the refusal to deal a violation of the Sherman Act. Damages alone does not constitute liability under the Act.

Section I of the Sherman Act prohibits contracts or combinations which restrain trade. Therefore, the termination of a distributor violates Section I only if, in fact, it constitutes a restraint of trade or was motivated by an anti-competitive intent. Bushie v. Stenocord Corp., 460 F.2d 116 (9th Cir. 1972).
*fn8"
In this case, even if there had been an agreement between Schmidt and Pflaumer to terminate Cicione and replace it with Pflaumer, Cicione could not sustain its antitrust claim absent proof of Schmidt's anti-competitive purpose or a resulting restraint of trade.

Cicione states that Pflaumer's takeover of its business reduced the number of distributors of Schmidt's beer in Philadelphia. In substance, this argument appears to be that Cicione's elimination from competition restrained trade in the market for Schmidt's beer. However, such argument is unavailing, for it is well recognized that a manufacturer may discontinue dealing with a particular distributor for business reasons which are sufficient to the manufacturer.

. . . If he is engaged in a private business, he is free to . . . [sell] his product directly to the ultimate consumer or through one or more distributors or dealers, as he may deem most profitable to him. If he chooses the latter method, he may exercise his own independent discretion as to the parties with whom he will deal. This is a common law right which the antitrust laws have not destroyed. Schwing Motor Company v. Hudson Sales Corporation, 138 F. Supp. 899, 902-03 (D. Md. 1956), aff'd per curiam, 239 F.2d 176 (4th Cir. 1956).

The resulting reduction in the number of Schmidt's distributors does not, standing alone, restrain trade nor decrease competition.

Nor does Cicione's claim that its performance was as good as, if not better than, other "ID" distributors
*fn10"
tend to show that Schmidt cancelled its dealership with an intent to restrain trade. "[The] most [Cicione's] evidence suggests is that [Schmidt] may have been mistaken in judging the quality of plaintiff's performance." Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors, Ltd., supra, 416 F.2d at 78. It does not mean that a finder of fact could draw from it the further inference that some "sinister anticompetitive intent" existed. Id.; Bushie v. Stenocord Corporation, supra, 460 F.2d at 120.

As was made clear by the Supreme Court in First National Bank v. Cities Service, Inc., supra, allegations of unreasonable restraint of trade must be supported by "significant probative evidence" in order to overcome a motion for summary judgment. Accepting Cicione's version of the facts as true, the Court finds that Cicione's allegations do not support a restraint of claim contention.

Even assuming, therefore, that Cicione could prove a conspiracy between Schmidt and Pflaumer, Schmidt could not have violated Section II by conspiring with Pflaumer to give Pflaumer a monopoly position with respect to the distribution of Schmidt's beer. Because Schmidt possessed a natural monopoly with respect to its beer, it could choose to market it in any way that it desired.

. . . Unless the manufacturer dominates the market, he has a right to give a dealer an actual monopoly, let alone a ' 'virtual' monopoly', in the sale of his particular make or brand in a particular territory." Schwing Motor Company v. Hudson Sales Corporation, supra, 138 F. Supp. at 906.

Cicione's second monopolization charge, which alleges a conspiracy between Schmidt and Pflaumer to obtain a monopoly position in the distribution of all kinds of beer for Pflaumer, is likewise deficient. Although the basis for this allegation is vague and illusive it appears that Cicione's claim in this regard is based upon its allegation that Pflaumer would use its alleged monopoly position as Schmidt's sole distributor to obtain a monopoly in the distribution of all beer and thus force retailers eventually to buy only Schmidt's beer.

This Court has searched the record in order to find evidence bearing on these two requisites -- specific intent to monopolize and a dangerous probability of success -- and can find no reference to any evidence which would support either of them. The only evidence on which Cicione seems to rely is the list of Schmidt's distributors who sold their businesses to Pflaumer. However, it is impossible for this Court to ascertain how this would support an allegation of an intent to monopolize the entire Philadelphia beer market. Pflaumer may well become the only distributor for Schmidt's beer in Philadelphia. Yet an intention to reach that goal is a far cry from a specific intent to monopolize the sale of all kinds of beer in Philadelphia. In order for such a monopolization scheme to succeed, other manufacturers who sell beer in Philadelphia, such as Budweiser, Schaefer, Miller, Schlitz, Piels, Ortlieb, Rheingold and Ballantine, would have to drop their current distributors and give those franchises to Pflaumer. As far as we can ascertain from the record in this case, there is no evidence that would even tend to suggest that this could occur. Not only is the record devoid of evidence to support a dangerous probability that monopoly would occur, but it does not show even a faint possibility of success. Based on the evidence that Cicione plans to produce at trial, a jury could not find either a specific intent or a dangerous probability of success. Therefore, even when Cicione's version of the disputed facts surrounding its termination are given credence, no monopoly violation is made out.

In summary, none of the antitrust allegations arising out of the termination establishes a claim cognizable under the Sherman Act. Whether viewed as a restraint of trade under Sherman I or an attempt to monopolize under Sherman II, there is no evidence alleged by Cicione which excepts this case from the well established law that the termination of a distributorship, without more, is not an antitrust violation.
*fn12"
The admonition of the Fifth Circuit in Burdett Sound, Inc. v. Altec Corporation, 515 F.2d 1245, 5th Circuit, 1975 is particularly apposite here.

Lest any other former distributors succumb to the temptation of treble damages, we reiterate that it is simply not an antitrust violation for a manufacturer to contract with a new distributor, and as a consequence, to terminate his relationship with a former distributor, even if the effect of the new contract is to seriously damage the former distributor's business.

The second of Cicione's additional Sherman Act claims not connected with its termination is its contention that Schmidt's allocation and implementation of territorial restrictions violates Section I of the Sherman Act. Although both parties agree that pursuant to Pennsylvania law, Schmidt, in 1971, gave each of the six wholesalers a "territorial letter" defining an exclusive territory, Cicione claims that this was illegal under the teachings of United States v. Arnold, Schwinn & Co., 388 U.S. 365, 87 S. Ct. 1856, 18 L. Ed. 2d 1249 (1967). There the Supreme Court said: ". . . where a manufacturer sells products to his distributor subject to territorial restrictions upon resale, a per se violation of the Sherman Act results." 388 U.S. at 379. Schmidt, however, argues that since the territorial arrangements were undertaken pursuant to the Pennsylvania Liquor Code, they were insulated from the antitrust statutes by virtue of the Twenty-first Amendment.

Section 2 of the Twenty-first Amendment states: "The transportation or importation into any state, territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited." It gives the states broad regulatory power over liquor use, distribution, or consumption within its borders. See, Joseph E. Seagram & Sons, Inc. v. Hostetter, 384 U.S. 35, 86 S. Ct. 1254, 16 L. Ed. 2d 336 (1966); Hostetter v. Idlewild Bon Voyage Liquor Corp., 377 U.S. 324, 84 S. Ct. 1293, 12 L. Ed. 2d 350 (1964). However, it is clear that the Sherman Act is applicable whenever its enforcement would not defeat the state's liquor policy. United States v. Frankfort Distillers, 324 U.S. 293, 65 S. Ct. 661, 89 L. Ed. 951 (1945). "Such a policy may be expressed either formally by legislation or by implied permission." 324 U.S. at 301. The problem, then, in cases like this is to determine whether the policy of the state sanctions the arrangement claimed to violate the Sherman Act. See United States v. Erie County Malt Distributors Association, 264 F.2d 731 (3d Cir. 1959); Fairfield County Beverage Distributors, Inc. v. Narragansett Brewing Company, 378 F. Supp. 376 (D. Conn. 1974); J.W.T. Inc. v. Kobrand Corp., CCH TRADE CASES, 1973-2 P 74,726 (N.D. Ill. 1973). At the very least, the Pennsylvania Liquor Code
*fn14"
must be considered "implied permission" for Schmidt's action in making territorial assignments to wholesalers. As a Pennsylvania manufacturer of brewed beverages who named its wholesalers as "primary or original [suppliers]" of its beer,
*fn15"
the Pennsylvania Liquor Code required Schmidt to designate the specific geographical area within which these "ID" distributors could resell beer. Because Schmidt's territorial restrictions were issued pursuant to the Pennsylvania Liquor Code, its actions are immune from the prohibitions of the Sherman Act.
*fn16"

However, Cicione's allegations go further than a claim that the allocation of territories was, in itself, illegal. Cicione also avers that the territorial designations were illegal insofar as Schmidt misused them. In this connection it complains that Schmidt's reduction of Cicione's territory in July of 1972 was undertaken to punish Cicione for its failure to adhere to Schmidt's unlawful demands. However, inasmuch as we have found that the business dictates were not illegal and since we hereafter find that its resale price policy was not illegal, there is no basis for the allegation that the territorial allocations were misused.

IV. Price Fixing.

The third claim of Cicione which does not arise from its termination is its allegation that Schmidt violated Section I of the Sherman Act by dictating the price at which Cicione could resell the beer to distributor and tavern accounts. Accepting this allegation as true for the purposes of this motion, the question remains whether the resale maintenance was permissible under the Pennsylvania Fair Trade Law. This law, 73 P.S. § 7, provides, in part, as follows:

No contract relating to the sale or resale of a commodity which bears, or the label or content of which bears, or the vending equipment from which said commodity is sold to the consumer bears the trademark, brand, or the name of the producer or owner of such commodity, and which is in fair and open competition with commodities of the same general class produced by others, shall be deemed in violation of any law of the State of Pennsylvania by reason of any of the following provisions which may be contained in such contract:

(a) That the buyer will not resell such commodity, except at the price stipulated by the vendor.

Furthermore, Cicione stated in its deposition that its prices would have been the same without Schmidt's alleged price-fixing.
*fn20"
A plaintiff seeking to recover treble damages under the Clayton Act must prove an injury to his business resulting from the defendant's violation, and some indication of the amount of damage. Terrell v. Household Goods Carriers' Bureau, 494 F.2d 16, 20 (5th Cir. 1974), cert. dismissed, 419 U.S. 987, 95 S. Ct. 246, 42 L. Ed. 2d 260; Hobart Bros. Co. v. Malcolm T. Gilliland, Inc., 471 F.2d 894, 901-02 (5th Cir. 1973), cert. denied, 412 U.S. 923, 93 S. Ct. 2736, 37 L. Ed. 2d 150. In light of Cicione's statement that its prices would have been the same even if Schmidt had not dictated its resale prices, there appears to be no basis for such a damage claim.
*fn21"

Our website includes the main text of the court's opinion but does not include the
docket number, case citation or footnotes. Upon purchase, docket numbers and/or
citations allow you to research a case further or to use a case in a legal proceeding.
Footnotes (if any) include details of the court's decision.

Buy This Entire Record For
$7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.